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Welfare bill U-turn could cost Treasury around £3bn a year, Resolution Foundation head Ruth Curtice says
Ruth Curtice, a former Treasury official how now runs the Resolution Foundation, a thinktank focusing on cost of living issues, told the Today programme that the welfare bill U-turn could cost the Treasury about £3bn a year. She explained:
The Institute for Fiscal Studies said [it would cost] £1.5bn yesterday on the Pip changes. I think it’s more like £3bn: you have the changes to Pip which cost £1.5bn to £2bn when you also take into account consequentials for things like carer’s allowance, but they’ve also said the freeze that they were going to introduce on universal credit health-related support will be undone and that will now rise in real terms and we estimate that will cost another £1bn.
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Meg Hillier, who tabled the reasoned amendment backed by more than 120 Labour MPs that would have killed the UC and Pip bill (see 8.46am), told the Today programme that welfare bill debacle showed that Downing Street should have listened more to its backbenchers. She said:
I think there’s huge talent, experience and knowledge in parliament, and it’s important it’s better listened to, and I think that message has landed.
I’m really blown away by the talent of my new colleagues in particular, because I didn’t know them before the election.
Their knowledge and experience was really helpful, and they know a lot about this subject, and I think if they’d been listened to better, we might have been in a better place.
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‘Good and workable compromise’ – lead Labour rebel Meg Hillier’s statement on why she’s accepting U-turn
Meg Hillier, chair of the Commons Treasury committee, was MP who tabled the reasoned amendment that would have killed the UC and Pip bill. She was working with other Labour select committee chairs, but as the lead signatory she was effectively leader of the reasoned amendment rebels.
Overnight she issued this statement explaining why she is accepting the government’s concessions. She said:
This is a positive outcome that has seen the government listen and engage with the concerns of Labour MPs and their constituents.
It’s encouraging that we have reached what I believe is a workable compromise that will protect disabled people and support people back into work while ensuring the welfare system can be meaningfully reformed.
This means that disabled people currently in receipt of Pip and the health element of universal credit will continue to receive the same level of support.
That future changes to disability support will be co-produced with disabled people, building on the work of Minister Stephen Timms MP to create a system that involves disabled people in decisions about their lives.
And that employment support will be brought forward and substantially improved so that people who want to work are not trapped in the benefit system.
This is a good and workable compromise and shows that the Labour government has listened and that working together with Labour MPs can move forward to support vulnerable disabled people, reform the welfare system in a just and inclusive way and contribute towards the economic growth and prosperity this country so desperately needs.
Meg Hillier speaking in the Commons Photograph: HoCShare
Updated at 08.58 BST
No 10 defends U-turn, saying ‘we have listened to MPs worried about pace of change’
Here is the statement issued by Downing Street overnight about the U-turn. A No 10 spokesperson said:
We have listened to MPs who support the principle of reform but are worried about the pace of change for those already supported by the system.
This package will preserve the social security system for those who need it by putting it on a sustainable footing, provide dignity for those unable to work, supports those who can and reduce anxiety for those currently in the system.
Our reforms are underpinned by Labour values and our determination to deliver the change the country voted for last year.
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Full text of Liz Kendall’s letter to Labour MPs confirming welfare bill U-turn
Liz Kendall, the work and pensions secretary, explained the changes to the bill in a letter to Labour MPs. The full text became available overnight. For the record, here it is in full.
In the letter Kendall says the changes will “strengthen the bill” – which is a novel way of describing a humiliating U-turn, but true in the sense that the bill will now be strong enough to get through the Commons.
Dear colleague,
We have always said we are determined to reform the social security system so it is fair, provides dignity and respect for those unable to work, supports those who can, and is sustainable so it is there for generations to come.
The broken system we inherited from the Tories fails all of those tests.
These important reforms are rooted in Labour values, and we want to get them right.
We have listened to colleagues who support the principle of reform but are worried about the impact of the pace of change on those already supported by the system.
As a result we will make two changes to strengthen the bill.
Firstly, we recognise the proposed changes have been a source of uncertainty and anxiety.
Therefore, we will ensure that all of those currently receiving Pip will stay within the current system. The new eligibility requirements will be implemented from November 2026 for new claims only.
Secondly, we will adjust the pathway of universal credit payment rates to make sure all existing recipients of the UC health element – and any new claimant meeting the severe conditions criteria – have their incomes fully protected in real terms.
Colleagues rightly want to ensure that disabled people and those with ill health are at the heart of our reforms.
We will take forward a ministerial review of the Pip assessment, led by the minister for social security and disability [Stephen Timms], to ensure the benefit is fair and fit for the future.
At the heart of this review will be coproduction with disabled people, the organisations that represent them, and MPs so their views and voices are heard. The review will then report to me as work and pensions secretary.
These commitments sit alongside our raising of the standard rate of the universal credit – the biggest real-terms permanent increase of any benefit since the 1980s – the protection of the incomes of the most vulnerable who will no longer be reassessed and the introduction of “right to try”.
Our reform principles remain; to target funding for those most in need and make sure the system is sustainable for the future to support generations to come.
We believe those who can work, should, and those who cannot, should be protected.
We will front load more of the additional funding generated by these reforms for back to work support for sick and disabled people.
Taken together it is a fair package that will preserve the social security system for those who need it by putting it on a sustainable footing, support people back into work, protect those who cannot work and reduce anxiety for those currently in the system.
Thank you to colleagues for engaging with us on these important reforms to social security.
Kendall does not say in this letter how much the U-turn will cost.
And she does not say what will happen to the bill that is getting its second reading on Tuesday. The changes to the health element of universal credit are on the face of the bill. The text cannot be changed before Tuesday, and so Labour MPs will have to vote for the bill on the basis of assurances that the government will rewrite large chunks of it with amendments the following week. Those amendments are not yet available.
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Starmer’s ‘humiliating U-turn’ will create ‘two-tier benefits system’, Tories say
Good morning. Political journalism, like all reporting, has a weakness for cliche and at Westminster there seems to be an unofficial rule that any use of the word U-turn must be proceeded by the adjective “humiliating”. The problem with this is that most U-turns are only mildly embarrassing, and turn out to be tactically advantageous. But this time – by accident or design – the Tories do seem to be using the word appropriately.
No 10 has performed a colossal U-turn on the universal credit (UC) and personal independence payment (Pip) bill, the legislation that will slash sickness and disability benefits. It was only confirmed in the early hours this morning, in an exchange of letters. Kiran Stacey has the details here.
In welfare matters, many policy decisions are motivated by the need to reduce costs decades ahead and that was always one of the main aims of this bill (as the Institute for Fiscal Studies analysis yesterday pointed out). The bill still functions as a long-term, cost-saving measure.
But it was also intended to save money for the Treasury during this parliament. In that respect, the bill has been more or less gutted. For Rachel Reeves, the chancellor, this is a disaster.
The U-turn has various big consequences, about which we will learn more today.
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People who will need sickness and disability benefits in the future are still due to lose out, by significant amounts, compared to what they might get if they were claiming benefits now. Ministers will still have huge difficulty defending this. The Tories are accusing the government of creating a “two-tier benefits system”.
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Keir Starmer’s authority in his party has been badly damaged. We can’t tell yet how significant this will turn out to be, but his personal approval ratings have collapsed since the general election and, at the very least, this will make recovery harder.
Back to “humiliating U-turn”, and this is what the Conservatives said about the move in a statement early this morning. Helen Whately, the shadow work and pensions secretary, said:
This is another humiliating U-turn forced upon Keir Starmer.
With the sickness benefits bill set to reach £100bn by 2030 the country needs action. But Labour has lurched from a bad plan to a next-to-nothing plan.
The latest ‘deal’ with Labour rebels sounds a lot like a two-tier benefits system, more likely to encourage anyone already on benefits to stay there rather than get into work.
We made a serious offer to Keir Starmer in the national interest if he was willing to grip the challenge of getting the welfare bill down and more people into work – making savings to avoid putting up taxes. But instead, he’s done yet another U-turn.
Here is the agenda for the day.
10.05am: Keir Starmer is expected to speak at the Welsh Labour conference in Llandudno.
Morning: Kemi Badenoch is on a visit in Essex.
11.30am: Downing Street holds a lobby briefing.
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Updated at 09.06 BST